APA expects roughly $700 million in lower annual cash costs by 2027, including $500 million in structural savings and $175 million in reduced interest expense. The company generated $1.2 billion in free cash flow in the first half of the year and used $750 million to repay debt. The Permian Basin and Egypt remain APA's core cash-generating operations, with 2026 Permian production now forecast at 123,000 barrels per day on about $1.3 billion in capital spending.
APA also expects its gas-trading operations to generate approximately $950 million in cash flow this year. APA is targeting more than 5% annual oil growth over the next three years, led by the Gran Morgu offshore Suriname project, which is expected to begin production in mid-2028 with a 220,000-barrel-per-day FPSO and a projected breakeven of $30 per barrel. Why One Energy Expert Is Betting on These 3 Oil Stocks Now APA (NASDAQ:APA) outlined a strategy centered on cash-generating operations in the Permian Basin and Egypt, cost reductions and a global exploration portfolio that management believes can support future production growth.
Speaking at the EnerCom conference, Chief Financial Officer Ben Rodgers said the company's 2026 capital budget is $2.1 billion, with most spending directed toward development activities in the Permian and Egypt. APA also plans to devote roughly 10% to 15% of annual capital spending to exploration over time, though that proportion is lower this year and is expected to rise next year, he said. → AMG's Alternatives Boom Powers Record Growth 3 Oil Stocks Rebounding Off Multi-Month Lows Rodgers said APA's portfolio diversification spans oil and natural gas, conventional and unconventional operations, and multiple geographic markets. The company views that diversity as an advantage because it can allocate capital among assets and access different global pricing points.
Rodgers said APA achieved its original target of $350 million in annualized controllable cost savings—including capital, lease operating expense and general and administrative costs—by the end of 2025, a year ahead of its target date. The company subsequently increased its savings goal, and now expects to exit 2026 with $500 million in structural annualized cost reductions. → Microsoft's Maia 300 Chip Targets NVIDIA's AI Dominance In addition, APA expects annualized interest expense to be about $175 million lower, resulting in roughly $700 million of lower cash costs as it enters 2027, according to Rodgers. The company generated $1.2 billion in free cash flow during the first half of the year and used $750 million of that amount to reduce debt, he said.
APA expects to end the year with debt near $3 billion, compared with nearly $9 billion when Rodgers joined the company about eight and a half years ago. → The Metals Company's Big Bet Now Comes Down to a License APA maintains a framework to return at least 60% of annual free cash flow to shareholders, a policy Rodgers said has been in place since 2021. The Permian Basin and Egypt are APA's primary sources of stable free cash flow, Rodgers said. APA has operated in Egypt for more than three decades and is the country's largest oil producer, largest onshore acreage holder and largest U.S. investor, according to the CFO.
In the Permian, APA now expects 2026 production of 123,000 barrels per day while holding its capital plan at approximately $1.3 billion. The outlook has increased several times since the company's initial November forecast of 120,000 barrels per day, Rodgers said, citing improved capital efficiency and well productivity. The company has also outlined 10 years of economic drilling inventory in the Permian and expects continued appraisal work to potentially expand that inventory.
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